How to get started investing in condo rentals.
When it comes to generating passive income, investing in condominiums for rental income is one of the most popular approaches. It offers three benefits: ownership, rental income, and the potential for a significant profit from resale in the future. However, success isn't easy for everyone, as there are many important things to learn. To increase your chances of success, consider the following guidelines:
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1. Choose a Potential Location
A condominium that is easy to rent out should be located in a prime location, close to urban amenities, workplaces, shopping malls, public transportation, schools, hospitals, markets, etc. Choosing the wrong location will reduce your chances of successful rental, and instead of passive income, you might end up burdened with mortgage payments.
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2. Choose the Appropriate Room Size
A room that is too small may not be attractive to tenants, while one that is too large will result in high rental costs and may not be suitable for single occupants. Therefore, choose an appropriate size. Generally, for working professionals, a room size of 30-45 square meters with partitioned areas is ideal. Because it can accommodate 1-3 people.
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3. Carefully Calculate the Return on Investment
Just knowing that you will get passive income isn't enough to make a decision. Investing in a condo for rent requires careful calculation of the annual return on investment. This is because it's a large upfront investment, often involving a loan, creating a financial burden. A simple way to calculate the return on investment is to divide the annual rental income by the condo price and calculate the percentage. A return between 6-8% is considered worthwhile because it's higher than the average loan interest rate for the first 3 years, which is usually around 2-3%. For example, if you buy a condo for 1.5 million baht and rent it out for 7,500 baht per month, you will receive 90,000 baht in rental income per year. Calculating the return on investment: 90,000 divided by 1.5 million, multiplied by 100, equals 6%.
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4. Prepare Your Finances
Few people buy condos with cash. Therefore, if you plan to buy a condo for rent, you must be financially prepared to secure loan approval. In addition to preparing income documentation, you need to... You still need to compare interest rates from several banks to find the one with the lowest loan interest rate.
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5. Market Research in the Area Where You Plan to Rent Out
This is just as important as the others. You need to research the rental prices of competitors' condos, examine the condition and readiness of your unit, and consider the amenities. This will help you determine if your chosen condo can compete. How can you attract tenants? How should you set the price to attract them while ensuring you achieve your target profit and return on investment?
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Buying a condo to rent out comes with investment risk. If you can't find tenants or don't have consistent rentals, your expected income can turn into debt. Therefore, careful planning and consideration of investment opportunities for success are crucial. This is especially important in areas with high competition; thorough market research and risk management are essential to increase your chances of investment success.
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Thank you for the valuable information from REIC.
